FAIRBANKS — With the exception of Gov. Bill Egan, no Alaska governor has ever been dealt a more difficult hand than Gov. Bill Walker, forced to deal with crisis from the start.
In Egan’s case, the former Valdez grocer nearly died from complications following gall bladder surgery two weeks after he took office in 1959 and he remained hospitalized in Seattle for three months. Egan recovered and helped the state get on its feet, during the first of his three terms.
For the second governor from Valdez, it was the state’s financial health that turned critical. In both cases, the governors from Valdez deserve credit for their service to Alaska.
Four years ago this week, Walker and Gov. Sean Parnell appeared at a debate in Fairbanks in the Carlson Center while battling for the state’s top job.
Decades of foolishly deciding state budgets entirely on the basis of current world oil prices would soon catch up with Alaska, and deficits of many billions would have to be faced, but neither man knew that just yet.
The thinking four years ago was that oil had taken a big drop, but it would remain near $90, which would not be low enough to set off alarm bells or force unpopular decisions about spending, taxes and the Alaska Permanent Fund dividend.
Parnell mentioned “today’s oil prices” at that debate, thinking they were still in the range of $88-$90 a barrel. But oil prices were dropping so fast that fall that Parnell didn’t know the price had already dropped that day to $82.50, down from $113 in June.
The fall continued after Saudi Arabia moved to undercut U.S. shale producers with added oil supplies. Alaska oil was down to $69.86 when Walker took the oath of office Dec. 1, 2014, and the situation began to look bleak.
On Jan. 21, 2015, Walker gave his first address to the Legislature with oil at $47.94. No one could quite believe it.
The state tax structure, SB 21, was not created with $47.94 oil in mind. It was created during the heady days of 2013, when Alaska leaders had fooled themselves into thinking that $100 per barrel was a solid price forevermore.
Oil prices fell more as the months passed, dropping to $26.23 on Jan. 20, 2016. When Walker addressed the Legislature for the second time, he compared the situation to the Great Alaska Earthquake of 1964 that had led to the destruction of his father’s construction business in Valdez.
“The earthquake destroyed whatever financial stability my family had managed to build. All of the material we had purchased for two construction projects was on the dock that day, all uninsured. The tsunami had swallowed it all,” Walker said.
“My brother, sisters and I did what we could to pitch in. I started a dog-sitting business for tourists while they went by boat to see Columbia Glacier. My brother Bob got a job in the crab-processing plant. We pooled our earnings. On Fridays, we all piled into the car to pick up my older sister from her babysitting job. Friday was her payday. We drove straight to Gilson Mercantile to buy groceries with her babysitting wages. It was that dire,” he said.
Walker said the collapse in oil revenue would require Alaskans to pull together to recover. It was a idealistic view and one that didn’t turn out the way Walker had hoped.
The governor proposed a modest income tax, a variety of other tax changes, budget cuts and using some permanent fund earnings to help pay for government. Nothing he proposed was radical. Most of it was rejected.
Had the Legislature approved his plan or something like it, Alaska would be in a much more stable financial position today.
On Friday, when Walker announced that he was suspending his campaign to endorse former Sen. Mark Begich, I thought back on what Walker has accomplished and failed to accomplish over the past four years.
Oil prices have recovered to $80.75 a barrel as of this week, but it would be a mistake to expect anything other than continued price volatility in the years ahead.
Nothing better illustrates the difference between campaigning and governing than the tendency of candidates to avoid all talk of difficult choices when they are seeking votes, hoping to avoid giving offense.
Walker gave offense and managed to move Alaska away from a total dependence on current oil prices. He took stands that others would have ducked and made it safe for politicians to talk about taxes and using earnings from the permanent fund to help pay for government.
He deserves thanks for offering a reasonable set of proposals to deal with the financial collapse and create a sustainable plan.
The Legislature refused to approve a balanced fiscal plan that would have spread the pain of dealing with the deficit beyond recipients of the permanent fund dividend. The fault lies with former Sen. Mike Dunleavy, his running mate, Sen. Kevin Meyer, and other senators who opposed any and all taxes.
The Senate intransigence has kept Alaska in a dangerous spot, as far as the future course of the state budget, one in which we are now dependent on oil prices and on investment returns of the permanent fund.
When Walker vetoed half of the dividend amount in 2016, the state was spending $1,000 out of its savings every 10 seconds. That decision, one on which legislators refused to try to overturn, has cost Walker support among those who think the dividend is all-important.
We have spent more than $14 billion of the $16 billion stashed away when oil prices were high and the Alaska tax system was structured to collect a high amount when prices moved into triple digits. We should have done more to save some of that money.
No one would ever confuse Bill Walker with a slick politician, but he’s done a good job with the difficult hand he was dealt.
Dermot Cole is a longtime Alaskan, an author of several history books and a former Daily News-Miner staff columnist. His email address is firstname.lastname@example.org.